Global stocks hit record highs as Federal Reserve's tapering concerns ease

By Matt Scuffham

NEW YORK (Reuters) - Global shares hit record highs Wednesday after data showed U.S. consumer price increases slowed in July, easing concerns that the Federal Reserve will imminently signal a scaling back of bond purchases.

The data showed tentative signs inflation had peaked as supply-chain disruptions work their way through the U.S. economy.

"This is a more moderate reading than expected, especially on the core," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.

Speculation is growing that Fed Chair Jerome Powell will signal timings on tapering stimulus at a meeting of central bankers in Jackson Hole, Wyoming, on Aug. 26-28.

Stronger-than-expected inflation data may have fueled talk of an imminent slowing of the Fed's bond purchases, said Craig Erlam, senior market analyst at OANDA Europe.

"Instead, we can all breathe a little easier, albeit safe in the knowledge that tapering is still coming and it's likely to be announced next month," he said.

U.S. nonfarm payrolls figures due in September could also influence tapering if they are particularly strong.

The MSCI all-country index, a gauge of stocks across the globe, hit a record high and was last trading up 0.29%.

The Dow Jones Industrial Average and S&P500 both closed at record highs, with sentiment boosted by U.S. lawmakers approving a trillion-dollar infrastructure package on Tuesday.

The Dow Jones Industrial Average rose 220.23 points, or 0.62%, to 35,484.9, the S&P 500 gained 11.02 points, or 0.25%, to 4,447.77 and the Nasdaq Composite dropped 22.95 points, or 0.16%, to 14,765.14.

European shares also hit record highs, clocking their longest winning streak in two months. The STOXX 600 index rose 0.4% to hit an all-time high for an eighth consecutive session.

 

Graphic: CPI has jumped in recent months https://fingfx.thomsonreuters.com/gfx/mkt/mopanmzqxva/Pasted%20image%201628114057120.png

 

OIL GAINS, TREASURY YIELDS FALL

Oil gained on Wednesday, changing course after the Biden administration said it would not call on U.S. producers to increase crude output, and that efforts to increase OPEC production were a longer-range plan.

U.S. crude oil futures settled at $69.25 per barrel, up 96 cents or 1.41%. Brent crude futures settled at $71.44 per barrel, up 81 cents or 1.15%.

U.S. Treasury yields fell in choppy trading, following a strong 10-year note auction; 10-year yields fell from four-week peaks earlier in the session.

Benchmark 10-year notes rose 4/32 in price to yield 1.3287%, down from 1.342% late on Tuesday.

The dollar index fell 0.198%, with the euro up 0.2% to $1.1742.

Gold prices jumped following the inflation data.

U.S. gold futures settled up 1.2% at $1,753.30.

Spot gold added 1.4% to $1,752.25 an ounce. U.S. gold futures gained 1.26% to $1,750.50 an ounce.

Asian shares had slipped as fears about further waves of the coronavirus dampened a positive lead from Tuesday's record close on Wall Street.

MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.3%.

The Delta variant of the new coronavirus is spreading quickly in many Asian countries, raising fears about local restrictions on travel and other activity damaging the economic recovery.

 

(Reporting by Matt Scuffham; additional reporting by Lindsay Dunsmuir in Washington; editing by Mark Heinrich, Nick Zieminski and Jonathan Oatis)